The ITO, Ward-4, Rajahmundry, Rajahmundry V. M/s G.S.L.Trust, Rajahmundry

ITA 168/VIZ/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6868 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 14-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TH L PETER
• Assessee Lawyers: C SUBRAMANYAM
• Section: 12A; 148; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 168/VIZ/2012 ASSESSMENT YEAR : 2008-09 INCOME TAX OFFICER, WARD 4, RAJAHMUNDRY G.S.L. TRUST, RAJAHMUNDRY PAN AAATG 3008 N (APPELLANT) (RESPONDENT) REVENUE BY TH.L. PETER ASSESSEE BY SHRI C. SUBRAMANYAM DATE OF HEARING 07-07-2014 DATE OF PRONOUNCEMENT 07-07-2014 O R D E R PER J. SUDHAKAR REDDY, A.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 25/01/2012 FOR THE ASSE SSMENT YEAR 2008- 09 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GRO UNDS: 1. THE CIT(A) ERRED IN TAKING INTO ACCOUNT THE I NCOME & EXPENDITURE STATEMENTS ONLY BECAUSE WHILE COMPUTING THE TOTAL INCOME OF A TRUST BOTH RECEIPTS AND PAYMENTS STATEMENT AND ALSO INCOME & EXPENDITU RE STATEMENT ARE TO BE CONSIDERED TO INCLUDE BOTH CAPI TAL AS WELL AS REVENUE ITEMS FOR COMPUTATION OF EXACT AMOUNT OF APPLICATIO N. 2. THE CIT(A) ERRED IN GIVING COGNIZANCE OF T HE VERSION OF THE ASSESSEE THAT IT NEED NOT ISSUE NOTICE U/S. 11(2) TO THE AO FOR AC CUMULATION OF INCOME FOR EARLY YEARS. 3. THE CIT(A) OUGHT NOT TO HAVE GIVEN CREDIT FO R THE VERSION OF THE ASSESSEE SINCE IT HAS NOT PRODUCED ANY INFORMATION WITH DOCUMENTARY EVIDENCE AS TO THE ACCUMULATION OF AMOUNTS OF RS.86 LAKHS I.E. ASS ESSMENT YEARS INVOLVED AND THE PURPOSE OF ACCUMULATION ETC. AT THE TIME OF ASSESSMENT 2 ITA NO. 168/VIZ/2012 GSL TRUST, RAJAHMUNDRY PROCEEDINGS. THUS, THE CIT(A) ERRED IN DELETING THE SAID ADDITION MADE BY THE AO. 4. THE CIT(A) HAS QUANTIFIED THE EXCESS AMO UNT THAT NEEDS TO BE BROUGHT TO TAX AT RS,5,48,395/- [IN PARA NO.3.3 OF THE ORDE R] BY TAKING INTO ACCOUNT THE INCOME &. EXPENDITURE ACCOUNT STATEMENT ONLY AS PER WHICH THE TOTAL INCOMES WERE AT RS.2,58,65,031/-ONLY. BUT IF BOTH THE RECEIPTS & PAYMENTS AND INCOME & EXPENDITURE STATEMENTS ARE TAKEN INTO ACCOUNT THE TOTAL INCOMES / RECEIPTS OF THE ASSESSE E WERE AT RS.4,22,74,894/- [WHICH INCLUDES BOTH CAPITAL AND R EVENUE ITEMS], AND THE STIPULATED 15% OF ALLOWABLE ACCUMULATION LIMIT WITHOUT ANY MANDATORY INTIMATION WORKS OUT TO RS.63,41,234/-. WHER EAS, THE TOTAL INCOME AS PER ASSESSMENT ORDER WORKED OUT TO RS.90,74,3 28/-. THEREFORE, THE EXCESS OF INCOME ACCUMULATED OVER & ABOVE THE STIPULATED LIMIT OF RS.63,41,234/- WOULD BE AT RS.2 7,33,093/- WHICH NEEDS TO BE BROUGHT TO TAX BUT NOT RS.5,48,395/- AS ARRIVED AT BY THE CIT(A). 5. THE CIT(A) ERRED ON FACTS AND IN LAW IN H OLDING THAT EXEMPTION U/S. 11 IS AVAILABLE TO THE ASSESSEE WITHOUT APPRECIATING T HE FINDINGS OF THE ASSESSING OFFICER. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A TRUST REGISTERED UNDER THE TRUSTS ACT. IT ALSO OBTAINED R ECOGNITION U/S 12A OF THE IT ACT. ASSESSEE TRUST FILED RETURN OF INCOME FOR A SSESSMENT YEAR 2008-09 ADMITTING NIL INCOME. RETURN WAS PROCESSED U/S 143( 1) AND A NOTICE U/S 148 DATED 09/03/2010 WAS ISSUED AS THE AO HAD REASO NS TO BELIEVE THAT INCOME CHARGEABLE TO TAX ESCAPED ASSESSMENT. IN RES PONSE ASSESSEE STATED THAT RETURN ALREADY FILED MAY BE TREATED AS FILED IN RESPONSE TO NOTICE U/S 148. THE REASONS RECORDED FOR REOPENING THE ASSESSMENT WERE COMMUNICATED TO THE ASSESSEE SUBSEQUENTLY. ON VERIF ICATION OF THE RECORDS DURING THE ASSESSMENT PROCEEDINGS IT IS FOU ND BY THE AO THAT THE TRUST HAS NOT FILED AUDIT REPORT ALONG WITH THE RET URN OF INCOME. IT IS FURTHER OBSERVED BY THE AO THAT THE ASSESSEE TRUST HAS NOT GIVEN ANY NOTICE U/S 11(2) IN FORM NO. 10 FOR ACCUMULATION OF INCOME. AO OBSERVED THAT THE ASSESSEE DEPOSITED FUNDS AMOUNTING TO RS. 86,00,000 /- WITHOUT APPLYING FOR ACCUMULATION. WHEN THESE ISSUES WERE POINTED OU T TO THE ASSESSEE, NO 3 ITA NO. 168/VIZ/2012 GSL TRUST, RAJAHMUNDRY REPLY WAS FURNISHED BY ASSESSEE. IN VIEW OF THE ABO VE, AO HELD THAT THE TRUST IS NOT ENTITLED TO THE BENEFITS OF SECTION 11 . 2.1 THE AO IN ORDER TO EXAMINE THE ACTUAL APPLICATI ON OF THE FUNDS DURING THE YEAR UNDER CONSIDERATION ASKED FOR CONSO LIDATED RECEIPTS AND PAYMENTS ACCOUNT WHICH WERE DULY SUBMITTED. AFTER V ERIFICATION OF THE DETAILS FILED AO WORKED OUT THE DETAILS OF FUNDS RE CEIVED AND APPLIED BY THE TRUST IN THE FOLLOWING MANNER: PAYMENTS RECEIPTS TOTAL PAYMENTS RS. 3,96,91,637 TOTAL RECEIPTS RS. 4,22,74,894 LESS: LOAN GIVE TO SWATANTRA HOSPITALS (P) LTD. AS THE SAME BEING ADVANCE GIVEN AND DOES NOT ACCOUNT FOR APPLICATION OF FUNDS. LESS: EXPENSES CLAIMED ON ACCRUAL BASIS DURING THE FY 2006-07. BALANCE LESS: ADVANCES BALANCE ADD: EXPENSES CLAIMED ON ACCRUAL BASIS DURING FY 2007- 08 AS PER SCHEDULE 5 OF THE BALANCE SHEET FOR THE Y.E. 31/03/08. TOTAL RS. 45,57,201 RS. 94,06,383.75 RS. 2,57,28,552.25 RS. 1,71,500.00 RS. 2,55,56,552.25 RS. 1,64,05,260.61 RS.4,19,61,812.86 TOTAL RS. 4,22,74,894 TOTAL RECEIPTS RS. 4,22,74,894.00 TOTAL PAYMENTS RS. 4,19,61,812.86 EXCESS OF INCOME OVER EXPENDITURE RS. 3,13,08 1.14 =============== 4 ITA NO. 168/VIZ/2012 GSL TRUST, RAJAHMUNDRY 2.2 FROM THE ABOVE TABLE, THE AO WORKED OUT EXCESS OF INCOME OVER EXPENDITURE AMOUNTING TO RS. 3,13,081/-. FURTHER, O N VERIFICATION OF THE STATEMENT OF INCOME AO FOUND THAT AN AMOUNT OF RS. 1,13,345/- IS CLAIMED BY THE ASSESSEE AS EXPENDITURE PERTAINING TO EARLIE R YEARS. ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF THE SAME. HOWEVER, THE REQUIRED DETAILS COULD NOT BE FURNISHED BY THE ASSESSEE. FURTHER, ON VERIFICATION OF BILLS AND VOUCHERS RELATING TO ADDITIONS TO FIXED ASSETS, BILLS AMOUNTING TO RS. 47,902/- COULD NOT BE PRODUCED. THEREFORE, AN AMOUN T OF RS. 1,61,247/- (RS. 1,13,345 + RS. 47,902) WAS ADDED TO THE TOTAL INCOME. THE ASSESSMENT WAS ACCORDINGLY COMPLETED BY ASSESSING O FFICER DETERMINING THE TOTAL INCOME OF THE TRUST AS UNDER: EXCESS INCOME OVER EXPENDITURE RS. 3,13,081 ADD: 1. ACCUMULATION OF FUNDS WITHOUT GIVING NOTICE U/S 11(2) RS.86,00,000 2. DISALLOWANCE OF EXPENDITURE RS. 1,61, 247 TOTAL INCOME ASSESSED RS.90,74,328/- ========== 3. ON APPEAL, THE FIRST APPELLATE AUTHORITY, ON THE ISSUE OF APPLICATION OF FUNDS HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS PURCHASE OF FIXED ASSETS AMOUNTING TO RS. 12,53,799 /- AND REPAYMENT OF VEHICLE LOANS AMOUNTING TO RS. 3,04,753/- SHOULD BE TREATED AS APPLICATION OF INCOME OF THE ASSESSEE. THE EXCESS AMOUNT WHICH NEEDS TO BE BROUGHT TO TAX WAS DETERMINED AT RS. 5,48,395/-. 3.1 ON THE ISSUE OF DELAY IN FILING OF FORM-10 AS M ANDATED BY SECTION 11(2) OF THE ACT, THE LEARNED CIT(A) RELIED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. NAGPUR HOTEL O WNERS ASSOCIATION, 247 ITR 201 (SC) AND HELD THAT FILING OF SUCH APPLI CATION THE FORM 10 DURING THE COURSE OF ASSESSMENT PROCEEDINGS WOULD E NTITLE THE ASSESSEE TO EXEMPTION. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 5 ITA NO. 168/VIZ/2012 GSL TRUST, RAJAHMUNDRY 5. WE HAVE HEARD THE LEARNED DR SHRI TH.L. PETER ON BEHALF OF THE REVENUE AND THE LEARNED COUNSEL FOR THE ASSESSEE SH RI C. SUBRAMANYAM ON BEHALF OF THE ASSESSEE. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS MATERIAL ON RE CORD, WE HOLD AS FOLLOWS: 5.1 THERE ARE TWO ISSUES THAT ARISES FOR OUR CONSI DERATION. FIRST IS WHETHER THE AMOUNTS SPENT ON ACQUISITION OF FIXED A SSETS SHOULD BE CONSIDERED AS APPLICATION OF INCOME. WHILE ADJUDICA TING THIS ISSUE, THE FIRST APPELLATE AUTHORITY HAS REFERRED TO THE CBDT CIRCULAR NO. 5P DATED 19/06/1968 AND THE JUDGMENT OF THE HONBLE KERALA H IGH COURT IN THE CASE OF CIT VS. SAINT GEORGE FORONA, 170 ITR 62 (KER.) A ND HELD THAT SUCH UTILIZATION OF INCOME FOR THE PURCHASE OF FIXED ASS ETS SHOULD BE TREATED AS APPLICATION OF INCOME U/S 11(1)(A) OF THE ACT. SIM ILARLY, RELYING ON THE JUDGMENT OF HONBLE KERALA HIGH COURT IN THE CASE O F CIT VS. JANMABHOOMI PRESS TRUST, 242 ITR 47, THE CIT(A) HEL D THAT LOAN REPAYMENT WOULD ALSO QUALIFY FOR TREATMENT AS AN AP PLICATION OF INCOME. THE LEARNED DR COULD NOT CITE ANY CONTRARY DECISION S. UNDER THESE CIRCUMSTANCES, WE UPHOLD THESE FINDINGS OF THE CIT( A) AND DISMISS THE GROUNDS RAISED BY THE REVENUE ON THESE ISSUES. 5.2 THE SECOND ISSUE THAT ARISES FOR OUR CONSIDERAT ION IS WHETHER THE CIT(A) WAS RIGHT IN HOLDING THAT, FORM-10 AS MANDAT ED U/S 11(2) OF THE ACT HAS TO BE TAKEN INTO CONSIDERATION, EVEN THOUGH, IT IS NOT FILED ALONG WITH THE RETURN OF INCOME, BUT, WHEN THE SAME IS FILED D URING THE COURSE OF ASSESSMENT PROCEEDINGS. TO COME TO THE SAID CONCLUS ION, THE LEARNED CIT(A) RELIED ON THE JUDGMENT OF THE HONBLE SUPREM E COURT IN THE CASE OF CIT VS. NAGPUR HOTEL OWNERS ASSOCIATION (SUPRA). N O CONTRARY DECISION IS BROUGHT ON RECORD BY THE DEPARTMENT. IN THESE CIRCU MSTANCES, WE UPHOLD THE FINDINGS OF THE CIT(A) ON THIS COUNT AND DISMIS S THE GROUND RAISED BY THE REVENUE. NO OTHER GROUNDS ARE ARGUED BEFORE US . 6 ITA NO. 168/VIZ/2012 GSL TRUST, RAJAHMUNDRY 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 07/07/2014. SD/- SD/- (SAKTIJIT DEY) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER VISAKHAPATNAM, DATED: 7 TH JULY, 2014 KV COPY TO:- 1) ITO, WARD- 4, AAYAKAR BHAVAN, NEAR KAMBAL TANK, VEERABHADRAPURA, RAJAHMUNDRY, E.G. DIST. 2) M/S G.S.L. TRUST, D.NO. 23-12-4, SRIRAM NAGAR, R AJAHMUNDRY 53310 3) CIT(A), VISAKHAPATNAM 4) CIT, RAJAHMUNDRY 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., V IZAG.